Falloff in IT sales prompts cutbacks at Lockheed

Bethesda contractor seeks voluntary layoffs in Gaithersburg unit

Facing falling information technology revenues — like many other government contractors — Maryland’s largest company is seeking voluntary layoffs among mid-level managers in its Information Systems & Global Solutions segment.

Military and aerospace giant Lockheed Martin expects to reduce its workforce in the unit, which is in Gaithersburg, by about 300 employees, or 1 percent of the division, Nettie Johnson, a spokeswoman for the Bethesda company, said this week.

IT sales drop

Lockheed Martin’s Information Systems business segment was its only division to see a decline in net sales last year.

Segment Net sales 2012* 2011* Change

Aeronautics $14.95 $14.36 +4.1%

Information Systems $8.85 $9.38 -5.7%

Missiles/Fire Control $7.46 $7.46 0%

Mission Systems/Training $7.58 $7.13 +6.3%

Space Systems $8.35 $8.16 +2.3%

Total $47.18 $46,50 +1.5%

* in billions

Source: Lockheed Martin

“It’s an affordability initiative,” Johnson said. “We want to reduce costs to pass the savings on to our customers.”

Lockheed hopes to have the moves completed by March 22. Johnson said she did not know how many managers would be affected in Maryland.

Lockheed’s information systems unit was the only one among the company’s five business segments to see a drop in net sales and operating profit last year. Sales in 2012 dropped 6 percent from 2011 to $8.9 billion, while profit declined 8 percent to $808 million, according to Lockheed’s latest earnings report.

The decline in information revenue was expected, CFO Bruce L. Tanner said in a recent conference call, “reflecting both the overall decline in the federal IT budget and the effects of the continuing resolution (of the fiscal cliff issue) in the fourth quarter.”

Cybersecurity activity rising

Lockheed has seen increased activity in some programs, including federal cybersecurity.

“We are very excited about the cyber activity,” Tanner said. “We’ve had some very successful wins, including taking some business away from some of our competitors within cyber. I believe we are the largest federal cyber provider in the industry. And that work is very valued.”

Linda Gooden, executive vice president of the information systems division, is retiring after more than 32 years with Lockheed, effective April 1. Sondra Barbour, now senior vice president of Enterprise Business Services, will succeed her.

Lockheed reorganized its electronic systems division in December, slashing 200 jobs, mostly in Orlando, Fla. The company also consolidated several corporate functions in Bethesda. Other buyouts and layoffs have been completed in the past couple of years, including cutting 740 employees from its mission systems sector last year.

The company now has about 120,000 employees worldwide, down some 26,000 from December 2008, according to recent annual reports and news releases.

Lockheed revenue up, Northrop’s down

Despite the loss in information systems revenues, overall sales at Lockheed still grew last year by 1.5 percent to $47.2 billion from 2011. Lockheed has the highest revenues by far of any Maryland company.

Lockheed had about 8,000 employees in Maryland as of late last year, down from 9,000 in 2011 and 10,000 in 2007, according to annual surveys by the Maryland Department of Business and Economic Development.

Other military contractors are seeing overall reduced sales and also are cutting employees, including in their information technology units.

Northrop Grumman of Arlington, Va., which has about 10,000 employees in Maryland, saw overall sales drop by 5 percent in 2012 to $25.2 billion. Northrop’s information systems sales last year fell 7 percent to $7.4 billion.

Northrop’s electronics systems saw sales drop 6 percent last year, and several hundred people in Maryland were cut, as that unit is in Linthicum.

General Dynamics of Falls Church, Va., saw total revenues decline by 4 percent last year to $31.5 billion. Information systems sales dropped 11 percent last year to $10 billion.

General Dynamics executives announced recently the company is cutting 84 employees in Charlottesville, Va., due to losing an Army IT contract.